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Finally, Ferrari-driving Wall Street types can trade Ferrari stock, ideally leading to big profits and the ability to purchase more Ferraris. It's a perfect cycle. Photo by Ferrari

After its $893 million IPO, is Ferrari stock a good buy? We ask the experts

Financial instruments aren’t our forte, so we turned to three analysts for the long view

October 23, 2015

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On Oct. 21, Fiat Chrysler boss Sergio Marchionne rang the New York Stock Exchange’s opening bell and took Ferrari (or about nine percent of it) public for the first time in the firm’s 68-year history. Trading under the ticker symbol “RACE,” Ferrari shares opened at $52 and closed at $55, enough to put $893 million in FCA's pocket and peg Ferrari’s total value at about $10 billion.

Pre-IPO, the entry level for something Ferrari-branded with a potential upside was perhaps a 1980 308 GTSi at around 45 grand. The floor of Ferrari ownership is now under 60 bucks. If nothing else, the novelty value of owning a tiny slice of the world’s most famous car company has its appeal.

Even if you can own part of Ferrai for less than the cost of a branded hat, is the stock a good buy? We asked three experts for their take:

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It’s a niche company that will have trouble standing on its own,” says University of Michigan Ross School of Business professor Erik Gordon—which is why he suggests steering clear long term. “I predict the stock does well for a while for the same reason Ferrari sells more (merchandise) than cars: More people like to be associated with the brand than buy the cars.”

Gordon sees the stock’s prospects dimming long term; once the excitement of owning Ferrari stock dies down and it’s seen as just another investment, he doesn’t view it as a stock with the profitable, sustained growth investors want.

Conversely, ADW Capital Management’s Adam Wyden says emphatically that it is a good buy. “There are no independently traded super-luxury car companies; they’re all part of conglomerates. So you don’t actually see the margins of a $250,000 Bentley … Ferrari could go from 7,700 units to 10,000 and their profits before taxes could quadruple, because the margins on each car are astounding.”

Richard J. Hilgert, Morningstar’s senior automotive equity analyst, also gives the stock a vote of confidence, placing it “in the middle in the ‘fairly valued’ range.”

“It’s not just a car company, it’s the car company,” he says. “It manufactures the dream of so many people around the globe.” In his view, Ferrari’s cachet elevates it and its stock above the status of a nuts-and-bolts automaker. “To call Ferrari a car company is like calling Hermes a leather company,” Hilgert adds. He sees RACE as something to buy and hold—whether or not it looks as good parked in your garage as a classic 250 GTO or a new 488.

Graham Kozak
- Graham Kozak drove a 1951 Packard 200 sedan in high school because he wanted something that would be easy to find in a parking lot. He thinks all the things they're doing with fuel injection and seatbelts these days are pretty nifty too.
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